Not a Blowout: DC District Court Upholds FDA’s Pre-2014 Interpretation on NCE Exclusivity for Combos, But Wants Additional Briefing on Retroactivity of Post-2014 Interpretation

By Kurt R. Karst –      

Earlier this week, the U.S. District Court for the District of Columbia (Judge Rudolph Contreras) issued a 33-page Memorandum Opinion in a case stemming from a Complaint filed in June 2015 by Ferring Pharmaceuticals Inc. (“Ferring”) against FDA challenging the Agency’s denial of 5-year New Chemical Entity (“NCE”) exclusivity for Ferring’s PREPOPIK (sodium picosulfate, magnesium oxide and citric acid) for Oral Solution, which the Agency approved on July 16, 2012 under NDA 202535 for cleansing of the colon as a preparation for colonoscopy in adults. In an Order granting in part and denying in part FDA’s Motion for Summary Judgment, and denying Ferring’s Motion for Summary Judgment, (other responsive briefs are available here and here) Judge Contreras, while deferring to FDA’s interpretation of the FDC Act’s NCE exclusivity provisions that led the Agency to deny Ferring NCE Exclusivity in 2012, directed FDA and Ferring to file renewed Motions for Summary Judgment on the issue of the retroactivity of a decision FDA reached in October 2014 that would have resulted in NCE exclusivity for PREPOPIK had the interpretation been in effect in 2012. 

As we previously reported, a lot of events led up to FDA’s denial of NCE exclusivity for PREPOPIK, and to Ferring’s lawsuit against FDA. While readers can refer to our previous post for all of the background, a couple of facts are critical.  First, on October 10, 2014, FDA released on the Agency’s website a final guidance document (see our previous post here) reinterpreting the statutory NCE exclusivity provisions to award NCE exclusivity for a newly approved Fixed-Dose Combination (“FDC”) drug product containing an NCE and a previously approved drug.  As summarized by Judge Contreras:

[P]rior to 2014, the FDA interpreted the five-year exclusivity provision to provide that only drug products containing no previously approved drug substances were eligible for exclusivity. Once eligible, however, the FDA interpreted the bar clause to bar all ANDAs and 505(b)(2) applications referencing that drug product or any later-approved products containing the product’s drug substances, in order to preserve the innovator’s exclusivity to the greatest extent possible. [(Emphasis in original)]

Also on October 10, 2014, FDA denied Petitions for Reconsideration and a separate Citizen Petition submitted to the Agency by Ferring and other companies requesting that FDA interpret the law to award NCE exclusivity for several previously approved FDC drugs, including PREPOPIK (Docket No. FDA-2013-P-0119).  In those petition denials, FDA refused to apply the Agency’s new interpretation to NDAs for FDCs approved prior to October 2014.

In its Complaint, Ferring alleges that FDA’s actions violate the Administrative Procedure Act, the FDC Act, and the Agency’s regulations. Specifically:

First, Ferring contends that the FDA’s prior interpretation, under which PREPOPIK was denied five-year exclusivity, contravened the plain language of the FDCA. Second, Ferring argues that, even if the language of the FDCA is ambiguous, the FDA’s interpretive choice to read “drug” in the eligibility clause to mean “drug product” was an unreasonable reading of the statute or was arbitrary and capricious because it treated similarly situated parties differently.  Finally, Ferring claims that, even if the FDA’s prior interpretation was permissible, its decision not to apply the new interpretation retroactively was arbitrary and capricious.

Reviewing the case under the familiar Chevron analysis, Judge Contreras considered the term “drug” in the FDC Act’s NCE exclusivity provisions to be ambiguous, thus requiring an evaluation of FDA’s pre-2014 interpretation of the statute under Step Two of the Chevron inquiry.  The bottom line, says Judge Contreras, is that FDA’s interpretation is reasonable:

As a result of the statute’s ambiguity, the FDA was left to determine at what level of specificity to define “drug”: at the “drug product” level, and in reference to all of the product’s “drug substances,” or at the “drug substance” level. Although scientific and policy considerations may have now persuaded the FDA to modify its interpretation, given the statutory ambiguity and the considerations discussed above, it was neither unreasonable nor arbitrary and capricious for the FDA to define “drug,” in the “eligibility clause” as “drug product,” and to thereafter ensure the greatest benefit for pharmaceutical manufacturers who are provided with exclusivity by interpreting “drug” in the “bar clause” as “drug substance.”  Therefore, Ferring’s Chevron Step Two argument fails.

That decision left remaining Ferring’s argument that FDA acted arbitrarily and capriciously when the Agency decided not to apply the Agency’s October 2014 reinterpretation retroactively, and only prospectively, thereby denying NCE exclusivity for PREPOPIK. On that issue, Judge Contreras says that he needs more from the parties:

[N]either party cites a case considering an agency’s decision to apply a new interpretation retroactively (or not) under that framework [(i.e., whether FDA acted arbitrarily and capriciously in not applying its new interpretation retroactively)]. Overall, the parties’ arguments on this issue are thin on legal citations. 

Despite FDA’s citation to one decision – Retail Wholesale & Department Store Union v. NLRB, 466 F.2d 380 (D.C. Cir. 1972) – that the Agency believes supports the Agency’s position against retroactivity, and that the The DC Circuit has described as “provid[ing] the framework for evaluating retroactive applications of rules announced in agency adjudications,” Judge Contreras says that neither FDA nor Ferring “grapple with that case and its progeny nor explain, alternatively, why it is inapplicable.” As a result, writes Judge Contreras, “[t]he parties’ limited reliance on case law is also a hindrance to the Court’s analysis of the retroactivity question.  And because the Court has held that the FDA’s prior interpretation passes muster under Chevron, the retroactivity issue will be dispositive of Ferring’s claims.”  Accordingly, Judge Contreras directed FDA and Ferring to file renewed Motions for Summary Judgment “that more fully address the retroactivity issue. . . .”

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